SRA Forced to shelve PII reforms
Much to the relief of many solicitors and those in the insurance sector, the Solicitors Regulation Authority (SRA) has been forced to put on hold its plans to amend the basis for professional indemnity insurance cover.
The Legal Services Board (LSB) has issued a notice pursuant to paragraph 21(1)(b) of Part 3 of Schedule 4 to the Legal Services Act 2007 in response to the SRA’s application submitted on 15 July 2014 seeking approval for changes to the Indemnity Insurance Rules to reduce the compulsory minimum level of cover to £500,000 from £2m (£3m for incorporated practices).
The effect of the LSB notice is to require that the SRA provide further information in support of its application and to further extend the time available to the LSB to consider the application.
The practical effct of this is that the chnages proposed by the SRA will not now come into effect before October 2014 which is the date on which the majority of regulated firms must renew their annual PII cover. The 2013 SRA Indemnity Insurance Rules and minimum terms and conditions will remain in force for the October 2014 renewal. Consequential changes have been made to the Participating Insurer’s Agreement 2014 to reflect this development.
The news was welcomed by the Law Society. Law Society President Andrew Caplen said:
‘We welcome both the announcement of the LSB and the SRA’s sensible decision that this makes changes before the key renewal date of 1 October impractical.
‘As we made clear, the changes proposed had the potential to generate serious consequences for the market and allowing a longer period for debate and consideration of any change is needed.
‘We share the SRA’s desire for better and targeted regulation and we look forward to working with the SRA, lenders and insurance industry to find a way forward which will ultimately benefit consumers and smaller law firms There is a need for a debate about the balance between competition and consumer protection. And not least the decision of the LSB to allow ICEAW licensed accountants to operate without comparable PII obligations.’